Sarb plans new forecasts after May interest-rate meeting

South Africa’s central bank will only publish estimates derived from its updated Quarterly Projection Model after its interest-rate setting meeting later this month.

The model, which informs monetary policy decisions, is undergoing a major overhaul for the first time in six years to enhance the South African Reserve Bank’s forecasting ability. While the new model will likely be used from the July monetary policy committee meeting, the central bank has already been using it to run shadow projections.

The Reserve Bank won’t share forecasts based on the new model for comparison until a paper on the improved QPM is released, it said in an emailed response to questions. The report is scheduled to be published after the May 25 interest-rate setting meeting, it said.

The enhanced QPM, which will include a measure to better anchor price-growth expectations and incorporate fiscal risks into projections, will come after policymakers responding to the worst global inflation shock in a generation veered from interest-rate paths suggested by the current model. It’s also likely to reduce forecasting errors for core inflation, according to the bank.

The central bank publishes updated forecasts, including for borrowing costs, economic growth and inflation, when the MPC votes on interest rates every two months. Forward rate agreements, used to speculate on borrowing costs, show traders are fully pricing in a quarter-point increase in the repurchase rate, with a chance of a bigger 50-basis point move this month. The benchmark is currently at 7.75%.

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